The impact of tariffs is arguably the most significant economic issue currently facing the Italian wine sector.
Navigating the complex network of economic exchanges and rules that govern the buying and selling of alcohol across international borders is a complicated business at the best of times. The introduction in recent years of a raft of severe import tariffs makes that process even more onerous.
The Trump administration’s approach to tariffs is unprecedented, leaving economists scratching their heads as they try to gauge the impact of his seemingly arbitrary punitive trade measures.
Understanding pass-through, the extent to which the cost of the tariffs is passed on to the final consumer through higher prices, is a complex and highly political calculation.
But who, ultimately, bears the cost?
Foreign producers? Domestic importers? Trade intermediaries? The consumer?
Who pays the price of US tariffs?
Evidence from US tariffs on European wine shows that tariffs are paid by multiple actors along the supply chain, including foreign producers, US importers, and consumers. While foreign producers initially absorb some of the cost, downstream markups mean that it is US consumers who ultimately pay the price, as price increases are compounded at each stage of the supply chain, beyond the cost of the tariff itself.
That’s according to a Working Paper published by the American Association of Wine Economists (the AAWE), which studied the question in the context of U.S. tariffs on European still wines implemented in 2019. The AAWE is a non-profit, educational organization dedicated to encouraging and communicating economic research and analyses and exchanging ideas in wine economics. The Association’s principal activities include publishing a refereed journal — The Journal of Wine Economics — and staging scholarly conferences that are forums for current wine related economic research.
AAWE Working Paper No. 291, published in October 2025, sought to resolve the question of who pays by tracing the tariff impact on prices of an imported product throughout its journey from the foreign producer – via the importer, wholesaler, and retailer – to the final consumer. AAWE working papers are unpublished scholarly articles on wine economics that are circulated for discussion and comment before formal peer review and publication. They serve as a platform for researchers to get feedback on their “work in progress” and cover a wide range of topics, from wine competition ratings and market analysis to historical statistics and consumer behavior.
In a 50 page economic study, the AAWE Working Paper paper found that high pass-through at the border can be consistent with low percentage changes in retail prices, while the dollar cost of tariffs is still largely borne by consumers, based on its analysis of the U.S. tariffs on European still wines implemented in 2019.
The 2019 tariffs
On 2 October 2019 the U.S. Trade Representative announced a tariff on a range of products from E.U. member states, including aircraft, wines, cheese, and fresh fruit. For wine, the U.S. imposed a 25% tariff on still wine with ≤ 14% alcohol by volume (ABV), packaged in containers of 2 liters or less, originating from France, Germany, Spain, and the United Kingdom. These tariffs took effect on 18 October 2019.
The E.U. announced retaliatory measures in November 2020 (U.S. wines were not included). In January 2021, the U.S. government expanded the list of products subject to additional tariffs, to include all still wine imports from France and Germany – regardless of alcohol level or container size – excluding only sparkling wines. However, this expansion was short-lived. In March 2021, at the beginning of the Biden administration, the U.S. and the E.U. reached an agreement to suspend all tariffs related to the dispute for four months. In June 2021, the suspension was extended for five years.
The AAWE found that U.S. consumers paid more than the government received in tariff revenue, because domestic markups amplified downstream price effects.
The research for the AAWE Working Paper was conducted by Aaron Flaaen, a principal economist at the Federal Reserve Board of Governors and an adjunct professor at Georgetown University, Ali Hortaçsu, a William M. Ogden Professor of Economics at the University of Chicago, Felix Tintelnot, Associate Professor of Economics at Duke University, Nicoláas Urdaneta, a PhD candidate in Economics at Duke University and Daniel Yi Xu, a David Rubenstein Distinguished Professor of Economics at Duke University.
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